Holiday Let Business Rates & Council Tax Guide for 2025
Whether you plan to use your second property for your own holidays or let it out and make a...
Have you always dreamt of owning a holiday home? Somewhere you and your family can relax and spend time together, as well as earn extra income by letting it out to guests? A holiday let mortgage could help you realise your dream.
Understanding any mortgage process is daunting, so we’ve put together this in-depth guide to answer any questions. Here, you’ll find everything you need to know about buying a holiday cottage and applying for a holiday let mortgage.
Use the quick links below to read a particular topic or continue reading for our comprehensive guide on holiday let mortgages:
A holiday let mortgage is specifically designed for those purchasing a property that will be regularly let out on a short-term basis for holiday guests. Understanding the difference between the types of mortgages available to you as a holiday homeowner is essential.
The type of mortgage you will need for your holiday home and where you get it from will depend on how you intend to use the property.
Holiday let mortgage: This is for a property that you intend to let out to paying guests for regular short periods of time. You can also use the property yourself, along with family and friends, but you’ll need to meet certain letting criteria set by the lender.
Second home mortgage: If your holiday home will be exclusively for your private use, it is considered to be a second home. This requires a residential mortgage. It is important to note that you won’t be able to let your property out to guests, or you’re likely to breach your mortgage agreement.
Buy-to-let mortgage: If you intend to rent out your holiday home for extended periods, where short and long-term tenancy agreements are set out, this will qualify as a buy-to-let mortgage.
It is vitally important that you understand the difference between each type of mortgage and which one you qualify for. Mortgage agreements often stipulate that you can’t let your property in certain ways – for example, a buy-to-let mortgage will not allow you to let the property for regular, short periods of time.
Are holiday let mortgages more expensive than buy-to-let mortgages?
Holiday let mortgages tend to be more expensive than buy-to-let mortgages, as holiday letting tends to be less predictable than running a long term let. However, this can be outweighed by the benefits of running a holiday let, like a potential for higher profit and the ability to use the holiday home yourself.
You can find both fixed and reduced variable rate offers, usually over an initial period of between 2 & 5 years.
When looking for a holiday home mortgage there are a few things you should consider. These are:
You’ve decided that you’re ready to start your search for a holiday cottage. You’ve worked out that you meet the criteria for a holiday let mortgage, so you now need to consider your budget. While you don’t need to have a specific property in mind, it’s a good idea to have a price range so you know what you can afford.
Within this budget, you must consider the cost of the deposit, which is often between 25% and 30% for a holiday let property. You must also take into account holiday let mortgage rates, which will vary according to the amount of deposit, your expected rental income, credit history, personal income, and various other factors. Depending on whether it’s your first holiday home or you have a portfolio, lender rates will also differ.
The key to finding out whether your chosen property is the right one for you will depend on research. Consider factors such as location, parking, local amenities, views and even if you intend to make your holiday let dog-friendly. These will all impact the potential return on investment and amount you can borrow.
Once you have identified a property you’re interested in, you can use a holiday letting agency like Coast & Country Cottages to accurately work out your potential income. It’s a good idea to then compare this with your holiday let costs.
If you are thinking of buying a holiday home in South Devon, our local New Property Consultants work closely with experienced local estate agents. They’re happy to give you a free, no-obligation bookings and income forecast, either by visiting your property or based on an online listing. We can also provide you with a mortgage support letter with this information, helping you secure your holiday let mortgage.
We can also provide information on holiday let income and expenses, finding a holiday property to buy, or whether any of the established properties we currently let are up for sale.
You can expect to pay a minimum deposit of 25% to 30%. This is required when looking for a holiday let mortgage, so your lender will likely check you have these funds before agreeing to offer you a holiday let mortgage.
LTV or loan to value is the maximum amount a mortgage lender will agree to loan you as a percentage of the property’s value. For holiday let mortgages, the maximum LTV will be around 75%. Mortgage lenders will also specify the absolute minimum and maximum they are willing to lend on a holiday let mortgage.
At the time of writing (April 2025), UK holiday let mortgage rates start at roughly 5%. However, interest rates are very transient, so it’s important to find up-to-date numbers and check with your mortgage broker for the best rates and options available to you.
Most mortgage providers will assess each case according to various criteria. This can include:
Not every home is eligible for a holiday let mortgage. Lenders typically insist that the property meets a minimum valuation (usually around £50,000) and has a clean legal title. Restrictions such as covenants or easements that limit short-term letting could be a red flag, so a solicitor’s title check is crucial early on.
Lenders often want to see that you have a steady income outside of your rental earnings. While the exact minimum varies, many providers look for a personal income somewhere between £10,000 and £40,000 a year. This demonstrates that you can cover the mortgage even during quieter letting periods.
To get the best rates, you’ll need to provide a projection of your expected rental income. As mentioned, this is something Coast & Country Cottages are more than happy to help with. Generally speaking, you’ll need to show you can make a gross income of 145% of the mortgage repayments.
This is something worth considering if you own existing rental properties. Some holiday let mortgage lenders limit the number of rental properties you can have in your portfolio. Some lenders may only allow one holiday let, whilst others may be more lenient.
You are allowed to stay in your holiday home every now and then, but it must not be used as a full-time dwelling. Most holiday let mortgage lenders stipulate occupancy restrictions which must be adhered to.
Finding the right holiday let mortgage lender can be a complex process. However, it is a vital step that affects whether or not you are able to purchase a property, and your finances down the line.
The obvious and most simple way to find the best holiday let mortgage is to use a comparison tool, like this one from Sykes Holiday Cottages. This shows a list of holiday let mortgage lenders, with important info about each mortgage.
However, as holiday let mortgages are more niche than other mortgage types, it’s well worth speaking to a specialist broker, who can use their knowledge to find the best mortgage for your specific situation.
While it is possible to manage the process yourself, finding and approaching a lender on your own, it’s always a good idea to get professional mortgage advice. A regulated financial advisor can research the market for you and help you through the application process, so you don’t have to do it alone.
For a mortgage lender to consider your request, you will need to provide key information and documentation including the following:
Obtaining a holiday let mortgage can be more challenging compared to residential or buy-to-let mortgages. This is due to several factors including income requirements, a higher deposit, rental income projections, property location, and fewer lenders offering holiday let mortgages.
However, it is absolutely doable – with the help of a trusted holiday let mortgage broker, securing a mortgage for your dream holiday home could be more straightforward than you think!
The maximum you are able to borrow for a holiday let mortgage is usually 75% of the property’s value. However, each lender has their own criteria, so check with a mortgage broker for the most up-to-date information.
Yes, interest-only holiday home mortgages are available. However, they are less common and often come with stricter lending requirements compared to traditional repayment mortgages. If you choose an interest-only holiday let mortgage, you will need to prove to the lender that you’ll be able to repay the full borrowed amount by the end of your mortgage contract.
Primrose Lodge, Norton, near Dartmouth
Once you have bought your holiday cottage and are ready to let it out to guests, you may need some help managing everything. That’s where holiday home management companies like Coast & Country Cottages come in.
Whether you are a first-time holiday cottage owner or already have holiday lets, choosing an experienced and reputable holiday home management agency is a great step towards running a successful business. Coast & Country Cottages can guide you through preparing your home for guests, marketing your property and administering bookings.
Whether you prefer to be hands-on or have the hassle taken out of the day-to-day running of your holiday let, we have an option to suit you. To make your letting journey as easy as possible, the following property owner guides may be useful to you:
At Coast & Country Cottages, we are fully committed to providing both our customers and holiday home owners with the highest possible levels of service.
Over the past 20 years, we’ve assisted many owners when buying and setting up their holiday homes in South Devon. Our local team in Salcombe and Dartmouth are on hand to provide you with all the knowledge and support you’ll need.
To learn more about the holiday letting services we offer, or request a free bookings and income forecast, visit our Let Your Cottage page and request a copy of our free Owner Guide.
Please Note: The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA.
As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.
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